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No stressed MSME loan to be NPA till March 2020: FM Nirmala Sitharaman to PSBs

Under this scheme, the government will give partial credit guarantee for purchases of such assets up to Rs 1 lakh crore this fiscal. The guarantee will cover up to 10% of their first loss.

Finance minister Nirmala Sitharaman at a review meeting with the public-sector banks, in New Delhi onThursday

Finance minister Nirmala Sitharaman on Thursday met chiefs of state-run banks and asked them to ensure that no stressed loan of MSME that is still standard is declared non-performing asset by March 31, 2020, taking advantage of an existing RBI scheme. Keeping with the Budget announcements to help address stress in the shadow banking sector, state-run banks have purchased pooled assets worth Rs 9,115 crore of financially-sound NBFCs and housing finance companies, and already firmed up plans to buy such assets worth another Rs 33,200 crore. Total pool buy-out of such assets since September 2018 has been to the tune of Rs 93,018 crore, including under the new scheme.

Under this scheme, the government will give partial credit guarantee for purchases of such assets up to Rs 1 lakh crore this fiscal. The guarantee will cover up to 10% of their first loss. To pass on the benefits of recent cuts in the benchmark lending rates by the RBI to borrowers, 15 PSBs have sanctioned repo-linked loans of over Rs 40,000 crore involving 1.08 lakh applications. The remaining banks will roll out repo-linked products by October. These measures are aimed at considerable improvement in access to affordable credit, the finance ministry said.

The minister said PSBs have already tied up with NBFCs vigorously to boost credit flow under the coordination scheme. As a next step, they will be holding meetings with customers for loans directly in 200 districts later this month where interested NBFCs will also be present. Subsequently, such meetings will take place in another 200 districts next month.

At the end of August 2019, overall credit growth in the banking sector stood at 10.1% on a year-on-year basis. This is in parallel with record recoveries and cleaning of bank balance-sheets showing a better quality of asset book. Banks’ loan disbursement to key sector remains robust, with disbursement of Rs 11.83 lakh crore done for the MSME sector in FY19 as against Rs 8.53 lakh crore done in FY18. Banks have also continued to support the housing sector by disbursing Rs 2.19 lakh crore for home loans in FY19 against Rs 1.81 lakh crore in FY18.